Q4Selling, General and Administrative Expenses
Decrease 16% Vs. Q4 2012
DALLAS -- (Business Wire)
DGSE Companies, Inc. (NYSE MKT: DGSE), a leading wholesaler and retailer
of jewelry,
diamonds,
fine
watches, and precious metal bullion
and rare
coin products, today announced its financial results for the quarter
and year ended December 31, 2013.
Fourth Quarter 2013 Summary
-
Revenues were $24.7 million compared to $37.5 million in the year-ago
period. Depressed prices in the precious metals market continued to
drive lower sales volumes, directly impacting scrap purchases, the
Company’s historically largest revenue stream.
-
Gross profit was $5.5 million, or 22.2% gross margin, compared to $7.4
million, or 19.6% gross margin in the same period last year.
-
The fourth quarter included $372,000 in non-recurring expenses related
to additional accruals for the 2010 State of Texas sales tax audit and
legal expenses related to the 2012 restatement, compared to $629,000
in non-recurring expenses in the prior year quarter.
-
Selling, general and administrative (“SG&A”) decreased 16% to $5.8
million from $6.9 million in the prior-year fourth quarter due to a
reduction in non-recurring expenses and continued expense reduction
initiatives.
-
Net loss, inclusive of the non-recurring expenses, was approximately
$405,000 or $(0.03) per share, compared to net income of approximately
$135,000, or $0.01 per share, in the year-ago period.
Full Year 2013 Summary
-
Full-year revenue of $108.5 million, down 15% vs. $127.9 million in
2012.
-
Gross profit was $19.8 million or 18.2% gross margin, compared to
$24.3 million or 19.0% gross margin compared to last year. Gross
margin increased as a percent of sales in every category in which the
Company operates; however, as the revenue mix shifted away from the
high margin scrap business, the consolidated margins actually
decreased as a percent of sales.
-
The full year included $1.8 million in non-recurring expenses related
to the previously-disclosed financial restatement and related legal
matters, including $775,000 in additional accruals for the sales tax
audit.
-
SG&A expenses decreased $3.4 million or 14% to $21.4 million compared
to $24.8 million in the prior year due to a reduction in non-recurring
expenses and continued expense reduction initiatives.
-
Net loss, inclusive of the non-recurring expenses, was $2.7 million,
or $(0.22) per share, compared to a net loss of $2.3 million, or
$(0.19) per share in the year-ago period. Excluding $1.8 million in
one-time expenses related to the sales tax accrual, 2012 restatement
and related legal matters, the Company would have recorded a net loss
of $878,000 for fiscal 2013, compared to net income from continuing
operations, excluding non-recurring charges, of approximately $1.6
million last year. The 2012 net loss included $690,000 in losses
related to discontinued operations, representing $0.06 per share.
James Vierling, Chief Executive Officer and Chairman of the Board,
stated, “We continue to navigate a challenging environment, but recent
encouraging movement in the price of gold suggests that improvements may
be on the horizon. We are focused on stabilizing the business to achieve
profitability at current revenue levels while building incremental
revenue streams. We reduced our SG&A expense by approximately $3.4
million during 2013. In the first part of 2014, we have now closed six
underperforming retail locations to further cut costs. These six
locations, all outside of our primary markets, generated just 3.6% of
our revenue but contributed 20% of our fiscal 2013 net loss. On an
annualized basis, the closing of these stores should result in
approximately $1.2 million in cost reduction, on top of the $3.4 million
in SG&A costs we have already eliminated. We will continue to carefully
evaluate our stores, making the tough decisions to streamline our
operations where appropriate. Longer term, we are focused on building
our e-commerce function and allocating resources towards revenue streams
with the highest profit potential, currently our high-end jewelry,
diamonds and watches. With the costs associated with the legacy issues
now largely behind us, and with a more efficient expense structure, we
are positioned for an improved 2014.”
Fourth Quarter 2013 Results
For the quarter ended December 31, 2013, revenues were $24.7 million, a
34% decrease compared to $37.5 million in the quarter ended December 31,
2012, due primarily to a significant decrease in gold prices, which were
on average 25% lower (as measured by London PM fix) than in the same
period last year. Gold prices had an especially negative impact on the
Company’s bullion and scrap categories, which were impacted by both
lower volumes and lower prices during the quarter. Jewelry sales
increased for the quarter, as the Company increased its marketing
efforts during the holiday season.
“Our efforts to focus on jewelry and watches during the holiday season
paid dividends,” added Mr. Vierling. “Historically, customers selling
pre-owned or 'scrap' gold created significant retail traffic at our
retail stores, and there was a likelihood of these customers spending
that cash to purchase something else in our stores. Lower scrap prices
have depressed this important portion of our business. However, we were
encouraged by retail traffic during the fourth quarter, though lower
scrap and bullion sales continued to depress our results. More recent
positive movements in gold prices, thus far in 2014, provide some
optimism of better days ahead, but we are focused on rationalizing
expenses to operate successfully at current revenue levels, which should
create stronger profitability as the industry normalizes.”
Gross profit in the quarter was $5.5 million, or 22.2% of revenue,
compared to $7.4 million, or 19.6% of revenue, in the prior year
quarter. The overall margin, as a percent of sales, increase was driven
by a shift in revenue mix.
SG&A expenses, inclusive of the non-recurring expenses, decreased $1.1
million, or 16%, in the quarter end December 31, 2013, to $5.8 million
compared to approximately $6.9 million in the prior year quarter. The
fourth quarter of 2013 included $372,000 in non-recurring expenses
related to additional accruals for the sales tax audit, and legal
expenses related to the 2012 restatement. Excluding the non-recurring
items, SG&A for the fourth quarter of 2013 would have been $5.4 million
compared to $6.2 million in the year-ago period.
Net loss for the fourth quarter was $405,000 or ($0.03) per share,
inclusive of the non-recurring expenses, compared to net income of
$135,000, or $0.01 per share, in the year-ago quarter.
“Though not yet finalized, we believe we have now fully accrued for the
sales tax audit, and hope to formally resolve this issue in the coming
weeks,” added Brett Burford, DGSE’s Chief Financial Officer. “In
addition, we believe we have nearly resolved the SEC investigation.
Going forward, the new management team will be able to focus on
improving the business, and will do so with a lower cost structure that
thankfully does not include these non-recurring charges.”
Full-Year 2013 Results
Revenues decreased by 15% in 2013, to $108.5 million, compared to $127.9
million for the prior year. This decrease was primarily the result of an
unprecedented drop in gold prices, which had a severe negative impact on
the Company’s purchases of scrap gold. The scrap portion of the business
has historically been one of the largest revenue and profit drivers for
the Company, and in 2013 saw an almost 50% reduction. Despite the loss
of store traffic due to fewer scrap sellers, the Company was successful
in growing its jewelry business in 2013, with roughly a 2% increase
versus the prior year. The significant price drop in the first half of
the year did help to drive incremental bullion sales in the second
quarter, but bullion revenue for the full year declined slightly due to
higher volumes but at lower spot prices.
Gross profit for the year was $19.8 million, or 18.2% of revenue,
compared to gross profit of $24.3 million, or 19.0% of revenue in the
prior year. This decrease is almost entirely due to significantly lower
sales in the high-margin scrap business. The Company increased gross
margin as a percent of sales in every category; however, as the revenue
mix shifted away from the high margin scrap business, consolidated
margins actually decreased as a percent of sales.
SG&A expenses decreased $3.4 million, or 14%, in 2013, to $21.4 million
compared to $24.8 million for the prior year. This decrease was driven
by a reduction in one-time costs, as well as cost reduction efforts
across the Company, and partially offset by the opening of six new
stores in 2012 and 2013. The Company spent an additional $1.5 million on
store operating expenses, attributed to new stores and stores that had
been opened for less than a year. Additionally, the company spent $1.8
million in 2013 in non-recurring expenses described above.
Depreciation and amortization increased by 5% in 2013 to $730,000
compared to $696,000 in the prior year. This increase was driven by new
assets related to store openings, as well as new assets related to the
move of the corporate office.
Net loss for the year was $2.7 million or ($0.22) per share, inclusive
of the non-recurring expenses, compared to net loss of $2.3 million, or
($0.19) per share, in the prior year. The 2012 net loss included
$690,000 in losses related to discontinued operations, representing
$0.06 per share.
Balance Sheet Summary
At December 31, 2013, DGSE Companies had cash and cash equivalents of
$3.2 million compared to $4.9 million at December 31, 2012.
Stockholders’ equity decreased 20% to $10.4 million at December 31, 2013
compared to $13.1 million at December 31, 2012. As of year-end, the
outstanding balance on the Company’s credit facility with NTR Metals,
Inc. (“NTR”) was $2.4 million compared to $3.6 million at December 31,
2012. This decrease is the result of loan principal repayment during the
fourth quarter of 2013. On February 25, 2014 the company and NTR entered
into a one-year extension of the Loan Agreement, extending the
termination date to August 1, 2015. All other terms of the agreement
remain the same.
Conference Call
DGSE Companies management will conduct a live teleconference to discuss
its financial results:
Date: |
|
|
|
March 27, 2014
|
Time: | | | |
4:30 p.m. ET/3:30 p.m. CT
|
Dial-in: | | | |
1-877-941-2068 if calling from the United States, or 1-480-629-9712
if dialing internationally.
|
Replay: | | | |
A replay will be available until April 3, 2014, which may be
accessed by dialing 1-877-870-5176 within the United States and
1-858-384-5517 if dialing internationally. Please use passcode
4673670 to access the replay.
|
Webcast: | | | |
The call will be webcast and will be available by visiting http://public.viavid.com/index.php?id=108243.
|
| | | |
|
About DGSE Companies
DGSE Companies, Inc. wholesales and retails jewelry,
diamonds,
fine
watches, and precious metal bullion
and rare
coin products through its Bullion Express, Charleston Gold & Diamond
Exchange, Dallas Gold & Silver Exchange, and Southern Bullion Coin &
Jewelry operations. DGSE also owns Fairchild International, Inc., one of
the largest vintage watch wholesalers in the country. In addition to its
retail facilities in Alabama, Florida, Georgia, Illinois, South
Carolina, Tennessee and Texas, the Company operates internet websites
which can be accessed at www.bullionexpress.com,
www.dgse.com,
www.cgdeinc.com,
and www.sbcoin.com.
Real-time price quotations and real-time order execution in precious
metals are provided on another DGSE website at www.USBullionExchange.com.
Wholesale customers can access the full vintage watch inventory through
the restricted site at www.FairchildWatches.com.
The Company is headquartered in Dallas, Texas and its common stock
trades on the NYSE MKT exchange under the symbol "DGSE."
This press release includes statements which may constitute
"forward-looking" statements, usually containing the words "believe,"
"estimate," "project," "expect" or similar expressions. These statements
are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements
inherently involve risks and uncertainties that could cause actual
results to differ materially from the forward-looking statements.
Factors that would cause or contribute to such differences include, but
are not limited to, continued acceptance of the Company's products and
services in the marketplace, competitive factors, dependence upon
third-party vendors, and other risks detailed in the Company's periodic
report filings with the Securities and Exchange Commission. By making
these forward-looking statements, the Company undertakes no obligation
to update these statements for revisions or changes after the date of
this release.
|
|
| |
|
| |
DGSE COMPANIES, INC. AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
| | | | | |
|
| | | December 31, |
| | | 2013 | | | 2012 |
| | | | | |
|
ASSETS | | | | | | |
Current Assets:
| | | | | | |
Cash and cash equivalents
| | |
$
|
3,214,770
| | | |
$
|
4,911,087
| |
Trade receivables, net of allowances
| | | |
269,616
| | | | |
718,501
| |
Inventories
| | | |
12,921,857
| | | | |
11,932,729
| |
Prepaid expenses
| | |
|
236,649
|
| | |
|
321,709
|
|
Total current assets
| | | |
16,642,892
| | | | |
17,884,026
| |
| | | | | |
|
Property and equipment, net
| | | |
5,074,860
| | | | |
4,849,937
| |
Intangible assets, net
| | | |
2,942,314
| | | | |
3,169,840
| |
Other assets
| | |
|
244,065
|
| | |
|
211,069
|
|
Total assets
| | |
$
|
24,904,131
|
| | |
$
|
26,114,872
|
|
| | | | | |
|
LIABILITIES | | | | | | |
Current Liabilities:
| | | | | | |
Accounts payable-trade
| | |
$
|
5,666,059
| | | |
$
|
3,561,794
| |
Accrued expenses
| | | |
2,137,361
| | | | |
1,250,319
| |
Customer deposits and other liabilities
| | | |
2,401,574
| | | | |
2,617,592
| |
Current maturities of long-term debt
| | | |
122,536
| | | | |
146,949
| |
Current maturities of capital leases
| | |
|
11,091
|
| | |
|
28,285
|
|
Total current liabilities
| | | |
10,338,621
| | | | |
7,604,939
| |
| | | | | |
|
Line of credit, related party
| | | |
2,383,359
| | | | |
3,583,358
| |
Long-term debt, less current maturities
| | |
|
1,757,827
|
| | |
|
1,843,062
|
|
Total liabilities
| | | |
14,479,807
| | | | |
13,031,359
| |
| | | | | |
|
Commitments and contingencies
| | | | | | |
| | | | | |
|
STOCKHOLDERS' EQUITY | | | | | | |
Common stock, $0.01 par value; 30,000,000 shares authorized;
12,175,584 shares issued and outstanding
| | | |
121,755
| | | | |
121,755
| |
Additional paid-in capital
| | | |
34,045,654
| | | | |
34,045,654
| |
Accumulated deficit
| | |
|
(23,743,085
|
)
| | |
|
(21,083,896
|
)
|
Total stockholders' equity
| | | |
10,424,324
| | | | |
13,083,513
| |
| | |
| | |
|
Total liabilities and stockholders' equity
| | |
$
|
24,904,131
|
| | |
$
|
26,114,872
|
|
| | | | | |
|
|
|
| |
|
|
| |
DGSE COMPANIES, INC. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF OPERATIONS |
| | | | | | |
|
| | | For the Year Ended December 31, | | | | Three Months Ended December 31, |
| | | 2013 |
|
| 2012 | | | | 2013 |
|
| 2012 |
| | | | | | | | | | | | |
|
Revenue:
| | | | | | | | | | | | | |
Sales
| | |
$
|
108,541,687
| | | |
$
|
127,876,610
| | | | |
$
|
24,722,102
| | | |
$
|
37,502,187
|
Cost of goods sold
| | |
|
88,780,096
|
| | |
|
103,592,557
|
| | | |
|
19,242,700
|
| | |
|
30,145,415
|
Gross margin
| | | |
19,761,591
| | | | |
24,284,053
| | | | | |
5,479,402
| | | | |
7,356,772
|
| | | | | | | | | | | | |
|
Expenses:
| | | | | | | | | | | | | |
Selling, general and administrative expenses
| | | |
21,438,488
| | | | |
24,802,391
| | | | | |
5,772,676
| | | | |
6,878,036
|
Depreciation and amortization
| | |
|
729,958
|
| | |
|
696,477
|
| | | |
|
186,223
|
| | |
|
248,217
|
| | |
|
22,168,446
|
| | |
|
25,498,868
|
| | | |
|
5,958,899
|
| | |
|
7,126,253
|
| | | | | | | | | | | | |
|
Operating income (loss)
| | |
|
(2,406,855
|
)
| | |
|
(1,214,815
|
)
| | | |
|
(479,497
|
)
| | |
|
230,519
|
| | | | | | | | | | | | |
|
Other expense (income) :
| | | | | | | | | | | | | |
Other (income) expense net
| | | |
(126,021
|
)
| | | |
(60,093
|
)
| | | | |
(107,817
|
)
| | | |
5,919
|
Interest expense
| | |
|
268,189
|
| | |
|
306,450
|
| | | |
|
97,623
|
| | |
|
52,654
|
| | |
|
142,168
|
| | |
|
246,357
|
| | | |
|
(10,194
|
)
| | |
|
58,573
|
| | | | | | | | | | | | |
|
Income (loss) from continuing operations before income taxes
| | | |
(2,549,023
|
)
| | | |
(1,461,172
|
)
| | | | |
(469,303
|
)
| | | |
171,946
|
| | | | | | | | | | | | |
|
Income tax expense (benefit)
| | |
|
110,166
|
| | |
|
160,483
|
| | | |
|
(64,213
|
)
| | |
|
54,070
|
| | | | | | | | | | | | |
|
Income (loss) from continuing operations
| | | |
(2,659,189
|
)
| | | |
(1,621,655
|
)
| | | | |
(405,090
|
)
| | | |
117,876
|
| | | | | | | | | | | | |
|
Discontinued operations:
| | | | | | | | | | | | | |
Income (loss) from discontinued operations, net of taxes of $0
| | |
|
-
|
| | |
|
(689,513
|
)
| | | |
|
-
|
| | |
|
17,128
|
| | | | | | | | | | | | |
|
Net income (loss)
| | |
$
|
(2,659,189
|
)
| | |
$
|
(2,311,168
|
)
| | | |
$
|
(405,090
|
)
| | |
$
|
135,004
|
| | | | | | | | | | | | |
|
Basic net income (loss) per common share:
| | | | | | | | | | | |
Income (loss) from continuing operations
| | |
$
|
(0.22
|
)
| | |
$
|
(0.13
|
)
| | | |
$
|
(0.03
|
)
| | |
$
|
0.01
|
Loss from discontinued operations
| | |
|
-
|
| | |
|
(0.06
|
)
| | | |
|
-
|
| | |
|
-
|
Net loss per share
| | |
$
|
(0.22
|
)
| | |
$
|
(0.19
|
)
| | | |
$
|
(0.03
|
)
| | |
$
|
0.01
|
| | | | | | | | | | | | |
|
Diluted net income (loss) per common share:
| | | | | | | | | | | |
Income (loss) from continuing operations
| | |
$
|
(0.22
|
)
| | |
$
|
(0.13
|
)
| | | |
$
|
(0.03
|
)
| | |
$
|
0.01
|
Loss from discontinued operations
| | |
|
-
|
| | |
|
(0.06
|
)
| | | |
|
-
|
| | |
|
-
|
Net income (loss) per share
| | |
$
|
(0.22
|
)
| | |
$
|
(0.19
|
)
| | | |
$
|
(0.03
|
)
| | |
$
|
0.01
|
| | | | | | | | | | | | |
|
Weighted-average number of common shares
| | | | | | | | | | | |
Basic
| | | |
12,175,584
| | | | |
12,175,361
| | | | | |
12,175,584
| | | | |
12,175,584
|
Diluted
| | | |
12,175,584
| | | | |
12,175,361
| | | | | |
12,175,584
| | | | |
12,175,584
|
Contacts:
DGSE Companies, Inc.
Jim Vierling, CEO, 972-587-4021
investorrelations@dgse.com
or
Hayden
IR
Brett Maas, 646-536-7331
Managing Partner
brett@haydenir.com
Source: DGSE Companies, Inc.
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